Government considering reducing sugar export subsidy

April 19, 2018 687

ISLAMABAD: Economic managers of Pakistan are mulling over reducing the billions of rupees worth of subsidy that mighty sugar millers have received on exports at the cost of farmers who have suffered a lot due to excessive delay in clearance of their dues.

Apart from this, the millers have also earned around Rs50 billion from the export of the sweetener.

Top government officials have now realised that the millers have exploited the situation to persuade the government to provide billions in subsidy for disposing of surplus sugar stocks. They also feel the millers are operating without any regulations and are seeking to push provincial governments to monitor their businesses.

The Supreme Court of Pakistan has also given the sugar millers deadline to clear outstanding bills of the growers.

Earlier, the government had permitted sugar mills to export the surplus commodity and make overdue payments to the growers.

The Economic Coordination Committee (ECC), in a meeting held in December last year, approved a minimum Rs15-billion benefit for the millers that were paying far less to the farmers in Punjab and Sindh. They were offering only Rs140 per 40 kg of sugarcane compared to the support price of Rs180 per 40 kg.

Total hit to the public exchequer, both federal and provincial, was estimated at Rs20.4 billion because of the cost of subsidy on sugar exports. This was in addition to the benefit of Rs30 billion that the millers would get by claiming a subsidy of Rs20 per kg on the export of another 1.5 million tons.

Government officials noted that the ECC had given the go-ahead for sugar exports with the intention that the shipments would provide enough liquidity for clearing outstanding bills of the growers.

However, these payments are yet to be made, though the mills have a cash flow of about Rs40 to Rs50 billion through the export of about 750,000 tons of sugar. This has sparked panic and frustration among the growers.

An ECC meeting held last month noted that international sugar prices had increased considerably, giving a relief to the domestic producers. Keeping that in view, the economic managers suggested that sugar export subsidy should be curtailed.

It discussed the numerous complaints made about lower payments by the mills to the growers. Being a provincial subject, it was suggested that provincial governments should be asked to monitor affairs of the mills.

The Commerce Division told the ECC that the Trading Corporation of Pakistan (TCP) had floated a tender for the purchase of 0.3 million tons of sugar on January 5, which was opened on January 25 after addressing apprehensions and reservations of the participants of a pre-bid meeting.

It said none of the sugar mills participated in the bidding, rendering the procurement process inconclusive.

To defend itself, the Pakistan Sugar Mills Association argued that a reference price of Rs48 per kg, set as the maximum procurement price by the ECC, was against the Public Procurement Regulatory Authority (PPRA) rules and payments in three installments of 40%, 40% and 20% ran counter to the spirit of the entire process which was aimed at facilitating payments to the growers.

The association sought 100% advance payment for the supply of sugar.

Earlier, it was decided that the TCP would purchase 0.3 million tons of sugar from the surplus stock via tenders in order to enable the mills to buy sugarcane from the farmers at the prescribed price and clear their dues.